Saturday, June 25, 2011

American Companies Invading Canada in Force, Who's Next?

Over the past few articles I have been explaining how Canada’s robust economy has been driving businesses in Canada and with our production tied to the high price of oil Canada becomes a place for business to thrive and prosper. Many brands are now expanding into Canada, the American brands that once seemed so exotic to Canadian shoppers have expanded north. Victoria's Secret and Crate and Barrel have opened flagship stores in Canadian malls in recent years.

In January, TJX Cos., which owns the discount clothing store Marshalls, and Tanger both announced northern expansion plans as well analysts predict that J. Crew, Macy's, Nordstrom, Kohl's and JC Penny are also on their way into Canada.

So the Canadian economy and the fact that 35 million new consumers are already attracted to American brands offers a unique expansion market for most American retailers. The biggest change however is with Target Stores. Target announced its purchase of 220 Zellers stores in a $1.8-billion deal with the American owner of the Hudson's Bay Co.

Target, which entices thousands of shoppers across the border, will finally cross the border itself. And Target's just the beginning. Like the War of 1812, the date of the last American invasion of Canada, a new invasion is happening only this time it’s an American retail invasion.

As U.S. retailers search for markets outside of their own stagnant economies, many set their sights on Canada. And that may mean trouble for home grown retailers. "Twenty years ago there were 20 U.S. retailers up here," says Toronto-based retail consultant Wendy Evans. "Today there are, soon to be, over 200." Canada is now in the midst of "a really big wave" of U.S. companies moving in, says Evans, and it should be enough to worry major Canadian retailers, such as Canadian Tire and Loblaw’s. "There is going to be a lot more competition," Evans says. "There are nine or 10 U.S. retailers right now that have announced plans to enter this market, or are actively looking. That's a lot." Evans predicts that 70% of the Canadian retail landscape will be foreign controlled by 2015, up from the about 50% that is foreign controlled today.

Many of the retailers now crossing the border have possibly contemplated the move for years, but it appears were finally pressed into action by the weak U.S. economy. Limited American opportunities in the medium term mean Canadian retailers will likely see competition increase steadily over the next five years, as their American counterparts turn to globalization for growth.

There was no real incentive for retailers to look beyond America's borders when its economy was thriving. The entire population of Canada is roughly the same as the population of California, points out retail consultant John C. Williams. While it makes sense for American companies to consider a Canadian move, a lot of U.S. companies, including Target, have been expanding in the States first.

The first proliferation of U.S. retailers really took off after NAFTA in 1994. That was the year Wal-Mart acquired 122 Woolco stores from Woolworth Canada, allowing it to open dozens of stores at once, in much the same manner Target is planning with its Zellers acquisition. The purchase allowed the company to move forward with its plans for international expansion, says Target spokesperson Amy Reilly."The timing is really about the excitement about this opportunity, which will allow us to open a meaningful number of stores in Canada," she says.

So it seems as if Canada is a viable market for American companies. Tim Horton’s the Canadian coffee icon is the reverse, with the Canadian market well saturated with its iconic brand of coffee and donut stores, their expansion is expected state-side over the next few years.

So it’s only a matter of time, Canadian shoppers interested in the unique American brand won’t have to make the trip across the border, fire up the internet or purchase online. Soon be a nice big American branded retail outlet will soon be found in your home town, just wonder who is going to be next?

Kensel Tracy is the Marketing Coach with the Corproate Coachworkz Inc., strategic advisors in the areas of marketing, leadership and business transformations.